Wednesday, March 12, 2014

In
a 2004, Florence Jaumotte released a women labor force participation study report for Organization for Economic Co-operation and Development’s
(OECD). She claimed that women choose between supplying
labor service not only against leisure but also “home production”, which mainly
consist of taking care of (young) children. In Asian traditions, this may even
include responsibility to care for elder family members.

Tradition is referred
to activities or practices passed down from previous generations. In Asia, traditions
tend to assigned home production like doing housework, taking care of children
and elders to women. Generally, men are viewed as breadwinner, therefore
commanded a relative superior standing to women. Malay tradition of Adat
Temenggung and Chinese tradition of Confucianism give superior
status to men in patriarchal family structure. Hypothetically,
these put extra barrier for women to choose work over home production.

If traditions see home
production as women’s duty, it also put extra opportunity cost for women if
they choose it. How high this opportunity cost depends on how tradition
thinking of the family are and how pressing is the needs for women to be
available for housework. Higher the opportunity cost, higher salary enticement
needed for women to choose working over home production. As a result, only single
and/or highly educated female stand considerable chance to participate in labor
market. Figure 1a that analyzes and plots data from Statistical Department of
Malaysia may confirm it. The trend line in Figure 1a has an upwards slope, thus
statistically implying a positive relationship between tertiary education
enrollment and female labor participation rate.
Nonetheless, Figures 1b shows a surprisingly negative relationship for
secondary enrollment and female to male labor participation rate.

Common thought is that
women work until they get married or luckier work until they have child.
Perhaps, having at least a diploma or degree qualification is an exception. Otherwise,
tradition is like a rope that tied down women to home production. Question is
does Malaysia’s Economic Transformation (ETP) has plan to relieve traditions
barrier for higher female labor participation rate?

ETP does aims to create job opportunities for skilled labor.
Projected new job creation for 2020 by qualification are 24% for
vocational/certificates, 22% for diploma, 22% for degree, 7% for
Master/professional and 3% for PhD. Jobs creation for unskilled worker is
projected at 22%. However, no specific action plan targeted specifically to
improve neither women education enrollment nor labor participation.

Technology, Childcare Service and Work Condition

Improvement in
household technologies, information technologies and work condition are
favorable factors to encourage female labor participation. Available of many
home appliances and automation in affordable prices like washing machine, cloth
dryer, auto vacuum cleaner and microwave have decrease time needed to perform
household works. Commercial childcare center, which also provide early
childhood education are available but may be unaffordable for the poor.

Early childhood
education has been allocated two “Entry Point Projects” (EPP) in National Key
Economic Area (NKEA) for education. Availability of foreign maids and/or
elderly parents that can help to take care of some household work and childcare
may help free up women to participate in labor force.

Information technology
and increasing job opening of freelance, part-time and flexible work hour should
greatly facilitate female participate in both labor market and home production.

Reforming Policies

Tax
and childcare support

In
term of tax, Malaysia does not have much encouragement to increase labor
participation among women. Working wife can claim for personal relief of RM9000.
If they did not work, the working husband can claim wife relief of RM3000. There
is no relatively favorable tax treatment of second earners, which is given in
countries like Austria, Czech Republic, France, Mexico, Portugal, South Korea,
Spain and Turkey.

The
more attractive motivation is the salary women can earn if they work. Therefore,
tax policies should be reformed to (i) give favorable tax treatment for second
earners, and (ii) ensure salary of Malaysian workers, particularly working
mother is not being discriminated and high enough to beat cost of living plus
extra expenses to take care of their household tasks. In addition, childcare
subsidies could be given since there are empirical evidences from some research
that claim its effectiveness. According to OECD Economic Studies No.37
(2003/2), child benefits increase the disposable income of families with two
children. Countries with biggest increment include Hungary (21%), Austria
(18%), Luxembourg (17%), Belgium (15%), Czech Republic (12%) and Germany (12%).

From
company perspective, revenue expenditure incurred in providing childcare benefit
to employee is deductible. This may encourage company provide childcare
facilities but how many company has done it? To what extend the childcare
facilities in the office can help working mothers? How about giving long maternity
leave, parental leave and childcare leave to help women to reconcile work and
family life? The same OECD studies reported variety degree of paid leave
entitlement across its member countries. Countries that offer long paid leaves
for mothers include France (73 weeks), Slovak Republic (59), Hungary (58), Finland
(55) Denmark (42) and Sweden (40). Australia and United States do not have paid
leaves while New Zealand only offers it recently. International Labor Organization suggested 14 weeks maternity
leaves. In Malaysia, materiality leaves is 8 weeks only.

Public preschool

Availability of ample public kindergarten is also
important to boost female labor participation as well as lessen the burden of
poor citizen. Indeed, having national-wide free preschool education has been
proposed by President of United States, Barack Obama in early 2013. He argued
that poor family who cannot afford preschool for their children may put their
children at a permanent disadvantage. Providing preschool also reduce the needs
of women to take care of their child at home. Yet, free public preschool may be
in conflict with ETP on education where private education institutions play big
roles in every level of education. Solution could be as simple as government put
a legal obligation for private education institutions, especially those
preschool operators to offer certain percentage of intake places as free for
the poor.

Flexible hour or Part Time Jobs

Flexible
working hour arrangement, especially those jobs that can be work from home are
getting more and more popular. A check through Wikipedia found some interesting
information. In 2003, the United Kingdom
government introduced legislationthat
gave parents of children under 6 years of age, or the parents of disabled
children under 18, the right in law to request aflexible
working arrangementfrom their employer.

Alternative
to flexible work time is part time job. For women that have young children, working
part time is preferable particularly if childcare is less affordable. There are
no data for part time employment in Malaysia. For other countries, data from
World Bank revealed higher percentage of part time job participation for women
as compared to men. For a random selection of 22 countries, female part-time
employment as percentage of total part time employment is over 50% (see Figure
2).

Austria recorded 80.6% percentage.
Among countries with high percentage include Switzerland (80%), Germany (78.7%)
and Spain (76.2%). Part time job also has its disadvantage such as low job
security, poor wages, no training and lack of other employment benefits and
rights. Thus, any policy to encourage part time should come with plans to
ensure proper working condition and human rights.

Conclusion

Women
can be an asset to our economic growth if their labor participation is increase
significantly. To achieve that, we need to change some of our traditions and
reform policies.

[Chinese version published at Nanyang Press, 24th February 2014. Available online at http://www.nanyang.com/node/601914. This English version may be slightly different from the Chinese online/printed newspaper version]

In July 2010, United Nations Entity
for Gender Equality and the Empowerment of Women (UN Women) is created. This is
another milestone in current trend to empower women for gender equality. Non-governmental
organizations (NGOs) that promote women’s rights are aplenty in both developed
and developing countries including Malaysia. However, are women and men equal? Can
women and men have equal role in the economy? Until now, these two questions
have been discussed but not yet agreed upon any conclusive answer. Let’s begin
reviewing it with some interesting statistics and trend findings.

Statistics
and Trends

Various data on Malaysia and
international employment are collected from World Bank’s database. Equivalent
data by Malaysian states are sourced from Statistical Department of Malaysia. Analyzing
these data through three categories, namely (a) labor participation, (b)
education, and (c) unemployment reveal some interesting (or alarming) trends.

Labor participation

In term of labor participation rate
in Malaysia, female rate is lower than male rate since 1990 (earliest data
available date, see Figure 1). The highest different between these two labor
participation rates is 39.5 percentage-points in 1998. However, encouraging
sign is that the different is narrowing since 1998 to 33.1 percentage-points
recorded in the latest year 2011, mainly due to declining of male labor
participation rate (not shown in graph). For the period between 1990 and 2011, average
rate for female labor participation is 43.5% while male is 80.2%.

We selected 22 countries randomly
(and because of data availability) to do international comparative study.
Malaysia’s female labor participation rate on average is lower than developed
countries like United States (58%), Australia (55.1%), United Kingdom (53.9%),
Singapore (52.8%), Germany (49.5%), Japan (49.5%) and South Korea (48.8%) as
well as developing ASEAN neighbors of Thailand (66.2%), Indonesia (50.2%) and
Philippines (49.4%) (see Table 1). Iceland even achieved an average female
labor participation rate at 70.2%, which is an astonishing 26.7
percentage-point room for improvement for Malaysia.

Malaysian states that have highest
female labor participation rate in 2010 (latest available data from Statistical
Department of Malaysia) are Penang, Kuala Lumpur, Selangor and Sarawak.
Meanwhile, states with relatively lowest rate are Kelantan, Kedah, Terengganu,
Perak and Perlis. Coincidently or not, states with highest rate also recorded
relatively higher GDP per capita and vice versa. These are shown in Table 2 and
Figure 2 (top).

Scatter chart in Figure 2 (bottom),
shows a positive relationship between female labor participation and GDP per
capita. The linear trend line is slopping upwards. This implies that increase
in female participation in the economy will help increase GDP per capita. However,
do our policies and Economic Transformation Programs (ETP) put enough efforts
to increase direct involvement of women in our economy?

Ratio of female to male tertiary
education enrollment has never declined less than 100 levels since 1990 (see
Figure 3). This implies that female enrollment in tertiary education has always
been more than male. In term of secondary education, female to male ratio
dropped below 100 level since 2007 but still hold above 97 levels. Therefore,
female labor participation rate of never more than 50% as compare to male labor
participation average rate of 80% has been shocking. Female labors have been
just slightly more than half of male labors as indicated by the bar chart of “ratio
of female to male labor participation rate” in Figure 3. These statistics shows
that women do get equality (if not better) education opportunity relative than
male. The mystery is why they participation in labor market is relatively so
low?

Figure 3: Female-to-Male Ratio: Labor Force & Education

(Source: World
Bank)

Unemployment

Average
female unemployment rate from 1990 to 2010 is 3.8% as compared to 3.3% for
male. Female unemployment throughout that period is always higher than male
except for year 1999 and 2003 as shown in Figure 4. Asian Miracle years from 1980s
to 1997/98 Asian Crisis have greatly reduce unemployment rate for both female
and male. Post Asian Crisis era not only keeping both unemployment rates
between 3% and 4% but also has reduced the gap between female and male
unemployment rates. While female has higher tertiary enrollment as compared to
male, why their unemployment rate is still higher? Is it discrimination against
women?

Figure
5 presents female unemployment in descending order for all 14 states (minus
Labuan). Women unemployment rate is clearly higher than male in all states
except for Kuala Lumpur, Johor and Kelantan. Kelantan recorded the second lowest
female unemployment rate and is one and only state where male unemployment rate
is higher than female. Highest female unemployment rate states for 2010 are
Sabah (5.8%), Sarawak (4.7%) and Perlis (4.5%). Meanwhile, the states with
biggest unemployment gap between genders are Perak and Pahang. While states of
different size and development level like Melaka, Kelantan and Penang can
achieve a low female unemployment rate, why unemployment rate in states like
Sabah, Sarawak and Perlis can be twice as much?

Figure
4: Malaysia's Unemployment Rate by
Gender (%)

Figure
5: Unemployment Rate by States, 2010

(Source: Malaysia’s Statistical Department)

Conclusion

While we are hearing hope upon hope
for gender equality, actual statistic and trend revealed the darker side of
reality. Malaysia’s female labor participation rate has been sustained around
43% without breakthrough improvement. This rate is still way below many
developed and developing countries in the world. Education seems not a
deterrent factor for woman to participate actively in our economy. Indeed,
female has better enrollment ratio to male. Yet, statistics show that female
unemployment is higher.

It
is not true that non-working women (example, housewife) did not contribute to
the economy. In contrast, it is important and beneficial that women play more
active role and direct participation into the economy, particularly the women
group with substantial education. They are the human capital for growth. Hence,
more and more understandings and critical debates are still needed to realize
the hope for gender equality in term of employment, opportunity and role to the
economy.

[Chinese version published at Nanyang Press, 17th February 2014. Available online at http://www.nanyang.com/node/600218. This English version may be slightly different from the Chinese online/printed newspaper version]

In
less than seven years, Vision 2020 will reach its day of reckoning. The vision
aimed to propel Malaysia to developed nation status by year 2020. After
setbacks from few crises, particularly the Asian financial crisis 1997/98, can
the country still reached its target? Economic Transformation Plan (ETP) has
been formulated to help Malaysia to achieve rapid development. Yet, what are
the gaps between now and our dream in 2020?

ETP
itself has three main targets, namely “high income”, “inclusiveness” and “sustainability”.

High Income Target

For
the first target, it aims to achieve income per capita of USD15,000 or RM48,000
(thus, implying exchange rate of RM3.20 per USD being used). Based on World
Bank’s benchmark estimation using nominal value and Atlas method, Malaysia’s
latest income per capita for year 2012 is USD9,800, thus USD5,200 short of ETP
minimum target.

Various
projected growth rates from 2012 to reach the USD15,000 target in 2020 are
presented in Figure 1. With ETP 6% growth per annum, Malaysia will reach the
target. However, is the 6% projected growth rate too ambitious? Average annual
growth rate from 1962 to 2012 (all available years in World Bank’s data) is
only 4.21%. Taking a more recent estimation, average annual growth rate from
2000 to 2012 is even lower at 3.36% only. Both of these average growth rates
will fail to make Malaysia a developed nation by 2020. The most optimistic
approach is to take average rate on Asian Miracle years, namely between 1988
and 1996. The rate is 6.76% but do we expected those “miracle” will repeat
itself now?

Figure 1: Projected GNI with Various Growth Rate

Another
benchmark targeted by ETP is service sector accounting 65% of GDP. Based on
data from Malaysia statistical department, service sector contribution to GDP
fluctuated between 44.64% (lowest, recorded in 1998) and 52.37% (highest,
2001). Mathematically, service sector’s contribution need to increase at a
calculated rate of 1.57 percentage points per year from its 49.31% in 2010.
Historical trend from 1988 to 2010 recorded only an average growth rate of 0.17
percentage point per year. Service sector contribution grew most rapidly from
1988 to 2001. Yet, it grew a low average 0.5 percentage points per year. In the
most optimistic view, only average annual growth for all positive years since
1998 yields a rate (1.68 percentage points) to achieve ETP target.

ETP’s
inclusiveness target aims to enable all Malaysian to enjoy the fruits of
growth. In another words, it aimed to reduce inequality gaps. Focus will be
given to households from lowest 40% income group. Based on World Bank’s data,
the different between the forth 20% income group and highest 20% income group
averaged around 31%. The same different between the first and second lowest 20%
income groups is only averaged around 4%. Average income share held by lowest
and highest 40% are respectively 13.64% and 72.84%, hence creating an average
income share gap of 59.2%. Overall income disparity is shown in Figure 3 and
Table 1.

Figure 3: Malaysia’s Income share
Distribution

Table 1: Malaysia’s Income share Gaps
Analysis

Year

Different lowest 20% -
second 20%

Different second 20% -
third 20%

Different third 20% -
forth 20%

Different forth 20% -
highest 20%

1984

3.81

4.61

7.13

33.82

1987

3.79

4.62

7.20

32.18

1989

3.78

4.57

7.04

31.49

1992

3.75

4.73

7.49

32.48

1995

3.78

4.72

7.44

33.39

1997

3.76

4.72

7.46

34.03

2004

4.35

4.77

6.79

22.41

2007

4.03

4.98

7.79

29.91

2009

4.11

5.07

7.92

29.81

After
1997, income share of the richest group has fall drastically to 22.41% in 2004,
perhaps due to the Asian financial crisis. Note that no data available between
1998 and 2003. However, their share of income rose gradually toward 30% level
in 2009.

In
our previous article, we highlighted that “inequality” issue in Malaysia often
narrowly focused on inequality between ethnic. Thus, no surprises that one of
the Strategic Reform Initiatives (SRIs) in ETP, namely “narrowing disparity”,
only aims to improve Bumiputera representation in market equity, employment,
high value-added occupations, and management positions.

Yet,
inequality should be viewed in wider scopes which include inequality between
states and sectors. For example, agricultural sector only contributed 10.6% of
Gross Domestic Product (GDP) in year 2010 as compared to manufacturing (26.1%)
and services sector (32.3%). Besides commercial agriculture like palm oil and
rubber plantation, income earned in this sector is relative lower.

In
term of geography disparity, Malaysia Statistical Department estimated that in
year 2010, Kuala Lumpur has the highest GDP per capita at RM55, 951. That is
about 6.8 times more than Kelantan, the lowest at RM8, 273. Kuala Lumpur GDP
per capita almost doubles Penang, the second highest state. Sarawak and
Selangor come third and fourth highest.

Sustainable Target

One
of the criteria for sustainable development is manageable debt level. Debt may
be needed when saving is insufficient to reach needed investment level.
Continuous threat of global recession has also prompted the government having
deficit budgets, which are financed by debt. Yet, two questions are important.
First, is the government spending prudent and necessary? Second, is the current
debt level alarming?

An analysis of operating versus development
expenditure reveals ineffective government’s spending pattern. Based on data
from Ministry of Finance, Figure 4 and Figure 5 show that operating expenditure
is higher than developing expenditure except for year 2003. The gap is getting
wider since 2003, averaging about 1.55 times for years between 2004 and 2012.

Figure 4: Operating versus Developing
Expenditure

Figure 5: Operating – Developing
Expenditure Ratio

High
operating expenditure is burdening the government, thus public sector should be
reduced in size but increase in efficiency. In addition, it is important that
the Strategic Reform Initiatives (SRIs) of “Public Service Delivery” fully
utilized information technology automation and reduce redundancy. It is good
that PEMANDU revealed that a total of 49 licenses have been either abolished or
identified to be abolished to reduce redundancy and create clear governance
structure.

Under
“Public Finance Reform” SRIs, ETP targets to reduce fiscal deficit to 3% of GDP
by 2015 and near budget neutral by 2020. Can we achieve this target given the
trend as shown in Figure 6? Since 2008, we have five consecutive years of
deficit, the worst being in 2012 (latest available data year).

Figure 6: Ratio of Budget Deficit
(Surplus) to GDP

ETP Plan and Strategies

Increasing
Gross National Income (GNI) is always main focus of ETP. It is necessary but
not the only factor to enable equality and sustainability. Top six EPP from
various NKEA are listed in Table 2.

Table 2: Top Six EPP Contributors of GNI

No

EPP

NKEA

GNI added in 2020 (RM million)

1

Attracting the right
mix of internal & external talent

Greater KL/KV

118,212.1

2

Attracting 100 of the
world’s most dynamic firms within priority sector

Greater KL/KV

41,440.5

3

Solar electronic
(silicon, wafer & cell, and module producers)

Electronic and
Electric

14,194.6

4

Improving energy
efficiency

Oil, Gas and Energy

13,925.7

5

Pushing generics
(healthcare) export opportunities

Healthcare

13,853.7

6

Increasing the (palm)
oil extraction rate

Palm Oil

13,711.1

All
EPPs have GNI target but Greater KL/KV NKEA seem to be obvious contributor.
Therefore, will this help achieve economic balance between geography (states in
Malaysia)? In addition to EPP, five economic corridors help to increase
national income too but also in favor of Kuala Lumpur / Klang Valley and
industry or service sectors. Exceptions are NCER that does focus on agriculture
and “oil and gas” plans under ECER may benefit the two less developed states of
Terengganu and Kelantan.

NKEAs
such as modern agriculture, wholesale/retail, palm oil and tourism could help
achieve inclusiveness if they give priority focus on rural or relatively less
developed states in Malaysia. It will be better if micro-financing is included
in Financial Service NKEA to fight poverty. In order for ETP to be success,
some areas need to be considered too. For examples, ETP need to solve brain
drain, corruption and wastage in economy.

Conclusion

In
summary, time does not wait for anyone while uncertainty of global politics and
economy pose danger to our economic dream to be developed nation by 2020. ETP
may have it comprehensive plan to bring us there. Yet, can it bridge the gaps
between now and targets level for 2020? More efforts certainly needed.

[Chinese version published at Nanyang Press, 30th September 2013. Available online at http://www.nanyang.com/node/567909. This English version may be slightly different from the Chinese online/printed newspaper version]